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Haiti: A Sweatshop Manifesto from the 1980s

I’ll be penning some thoughts on the situation in Haiti soon, but I wanted first to post something written by a friend, Nancy Alexander, that helps us remember exactly how the International Monetary Fund helped destroy the country’s agriculture. Back in 2008, she did the hard work of digging through the IMF’s public documents to find out exactly what they got up to in the 1980s. The evidence below comes from an IMF staff report and policy paper. It’s a skeleton that the IMF would rather keep hidden – but this is a manifesto for turning Haiti into a sweatshop.

The IMF’s Role in Liberalizing Agricultural Markets in Haiti

Nancy C. Alexander

July 14, 2008

With good reason, there is considerable interest in the role of the IMF in liberalizing agricultural markets in Haiti. Many countries, such as Japan, refuse to liberalize rice markets because they view production for domestic consumption as a national security issue. However, the IMF required that the government of Haiti liberalize its grain markets and, consequently, the country was swamped with cheap grain imports and most domestic grain production systems, including those for rice, were destroyed.

The evidence for this assertion is found in IMF documents dating back to the late 1980s. These documents demonstrate that the IMF called for the government to aggressively boost the cultivation and export of coffee and “reduce the attractiveness of domestic grain production.”

Key quotations from two IMF documents appear below: 1) the IMF Staff Report for Haiti’s 1986 IMF Article IV Consultation and the request for a new loan and 2) the IMF’s Policy Framework Paper (PFP) for Haiti for the period 1986/87 to 1988/89.

The names of these documents bear some explanation. The IMF conducts an “Article IV Consultation” for each of its approximately 186 member governments, which describes and assesses the performance of the national economy. The IMF Policy Framework Papers (PFPs) described the institution’s anticipated transactions (and associated policy conditions) with each borrowing country over the medium-term – usually a three-year period. The IMF no longer prepares PFPs.

I. Staff Report for the 1986 Article IV Consultation and Request for Arrangements Under the Structural Adjustment Facility. November 21, 1986.

Para 1: “Government policies will seek to redirect economic activity away from the overly protected inefficient industries producing for the domestic market and toward more productive activities, particularly in the export sector….The momentum of reform will be maintained over the next three years with policy measures that include further trade liberalization to expose both public and private firms to greater competition…”

Para 2a: “In the agriculture sector, impetus to export will be provided by the elimination of export taxes on coffee and all other agricultural products….Also, the replacement of quotas on grain imports by a tariff or a system of threshold pricing, which is expected to reduce the attractiveness of domestic grain production, would release land for coffee…”

Page 14: The reduction of taxes on coffee and other exports presents the possibility that government revenue may decline.

Page 19: Haiti has not experienced a significant loss of competitiveness since 1980…“the reason is that the abundance of unemployed labor, the virtual absence of collective bargaining and the relatively low level of skills required in light manufacturing activities have tended to dampen wage demands….Available information, including movements in the minimum wage, suggests that real wages in Haiti have declined by almost one fourth since 1980.”

Page 20, “The value of imports is projected to rise by 23% in 1986/87 and 15% in 1987/88” after which it is expected to subside….“Coffee export volume is expected to increase by 17% in 1986/87…”

Paragraph 20 describes the ceiling on the public sector wage bill, closing of a sugar mill, liberalization of the vegetable oil market with plant closing in 1985/86, and restructuring of a flour mill and another sugar mill.

The IMF called for public investment in: irrigation and feeder roads, plus ensuring the availability of power, water, telecom and transport facilities for exporters.

Paragraph 31 describes the continuation of import liberalization during 1986/87. In 1985/86, the IMF called for a reduction in the list of products subject to import quotas from 111 to 35; replacement of the remaining 35 import quotas and prohibitions with tariffs; licensing for only about six products; and a major tariff reform so that most remaining tariffs would average about 20%.

Paragraph 35 states: “Within agriculture, the incentive to produce coffee rather than grains should be increased as a result of the reduction in the coffee export tax to 10% in 1986/87 and its elimination thereafter, and the replacement of quantitative restrictions on grain imports with tariffs and/or a system of import threshold prices. This should discourage the production of grains on marginal hillside land and encourage their replacement with coffee and other trees, which would reduce soil erosion.” It also calls for the expansion of irrigation and an increase in charges for water.

It further states: “Subsidies on fertilizers within rural development products will be removed in 1986/87 in order not to discourage private distribution channels.”

Paragraph 36 states that private free zones will be established, plus new private industrial parks will be encouraged. Within the industrial export sector, there will be a free determination of wages. A new investment code will initiate reforms in 1986/87.